Transferring property from personal to the untaken/carried-over passive losses move with property?

8 Replies

Am looking to move a rental property from my name to an LLC, but am trying to figure out if the passive losses that have been incurred (but not taken and carried over due to salary limitations) move with the property into the LLC, or if it even matters at all. Want the asset protection, but don't want to lose the future tax writeoffs. Thanks in advance for the advice.

I am not a accountant but I believe a single member LLC is a non entity as far as the IRS is concerned.

@Jeff Sadosky This is a non-qualifying disposition and as such, not a taxable transaction. So the passive losses will stick with the property.

@Bob B. is correct, if its a single member llc, if its not you could (likely will) be in trouble. 


Why not just buy some extra insurance to protect the asset.

People only sue when they are mad, OR when someone has done something stupid.

1)don't piss people off 2)don't do anything dumb 3) carry liability insurance

Follow those three rules and HOW you hold the property really shouldn't matter.

@Bob B. @Brandon Hall @Judah Hoover Thanks all, yes it would be a single member LLC. Appreciate the feedback. And Judah, agree with your three points, carrying plenty of insurance, but belts and suspenders never hurt anyone.

@Jeff Sadosky "belts and suspenders..." I absolutely 100% agree my friend. And I recommend people buy in the name of an LLC for just that reason. But I also caution going to too much trouble to get properties in an LLC if they weren't bought that way, sometimes the costs and hassle aren't worth the reward.

your losses would carry forward but not sure it would be worth transferring the asset if you have adequate insurance

As a side thought, be careful with this as well because many loans carry with them a provision that if ownership of the property is transferred, even to a single member LLC where you are the sole member, the bank could call the note due. This isn't a likely scenario, but if you stick to the letter of the agreement, they may reserve the right to do this. You should consult with a lawyer and be sure you are familiar with your loan contract.

I am a CPA and either way the passive losses will still go to your personal tax return since a sole member LLC is considered an individual. I currently have 7 SFH rentals under my name and I simply have the umbrella insurance to cover the liability. The advice I received a while ago from my attorney was that if you did get sued even if they had been placed in an LLC there was a good chance the LLC protection would be pierced so it is hard to know if it is worth moving them to a LLC.

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